Arista Records LLC et al v. Lime Wire LLC et al

Filing 719

OPINION AND ORDER #100283 for the foregoing reasons granting re: 690 MOTION in Limine TO PRECLUDE DEFENDANTS ARGUMENT THAT OTHER ILLEGAL SERVICES WOULD HAVE INDUCED INFRINGEMENT OF PLAINTIFFS COPYRIGHTS IF LIME WIRE HAD NOT, filed by Arista Music, fka BMG Music, Elektra Entertainment Group Inc., Capitol Records, LLC, fka Capitol Records, Inc., Motown Record Company, L.P., Atlantic Recording Corporation, Warner Bros. Records Inc., Laface Records LLC, Virgin Records America, Inc., Priority Records LLC, Capitol Records, Inc., BMG Music, UMG Recordings, Inc., Elektra Entertainment Group, Inc., Sony BMG Music Entertainment, Sony Music Entertainment, fka Sony BMG Music Entertainment, Interscope Records, Arista Records LLC. (Signed by Judge Kimba M. Wood on 4/29/11) (cd) Modified on 5/6/2011 (ajc).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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ARISTA RECORDS LLC; ATLANTIC RECORDING
CORPORATION; ARISTA MUSIC, fka BMG
MUSIC; CAPITOL RECORDS, INC; ELEKTRA
ENTERTAINMENT GROUP INC; INTERSCOPE
RECORDS; LAFACE RECORDS LLC; MOTOWN
RECORD COMPANY, L.P.; PRIORITY RECORDS
LLC; SONY MUSIC ENTERTAINMENT, fka SONY
BMG MUSIC ENTERTAINMENT; UMG RECORDINGS,
INC; VIRGIN RECORDS AMERICA, INC.; and
WARNER BROS. RECORDS INC.,

06 CV 5936 (KMW)
OPINION AND ORDER

Plaintiffs,
-againstLIME GROUP LLC; LIME WIRE LLC; MARK
GORTON; GREG BILDSON; and M.J.G. LIME WIRE
FAMILY LIMITED PARTNERSHIP,
Defendants.
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KIMBA M. WOOD, U.S.D.J.:
I.

Introduction
On May 11, 2010, this Court granted summary judgment in favor of Plaintiffs on their

claims against Defendants LimeWire LLC (“LW”), Lime Group LLC (“Lime Group”), and Mark
Gorton (collectively, “Defendants”) for secondary copyright infringement. The Court found that
Defendants had induced multiple users of the LimeWire online file-sharing program
(“LimeWire”) to infringe Plaintiffs’ copyrights. In the Court’s Opinion and Order (as amended
on May 25, 2010), the Court detailed this case’s procedural and factual background, familiarity
with which is assumed. (See Dkt. Entry No. 223; Arista Records LLC v. Lime Group LLC, 715 F

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Supp. 2d 481, 507 (S.D.N.Y. 2010).) The litigation is now in the damage phase, with a trial on
damages scheduled for May 3, 2011.
Plaintiffs have identified 11,205 sound recordings that have allegedly been infringed
through the LimeWire system. For the approximately 9,715 post-1972 sound recordings,
Plaintiffs have elected to seek statutory damages under Section 504(c)(1) of the Copyright Act.
For the approximately 1,490 pre-1972 sound recordings, Plaintiffs are seeking actual damages.
In connection with the damage phase, Defendants have offered expert testimony
purporting to show that other illegal services would have induced infringement of Plaintiffs’
copyrights had Lime Wire had not done so. Plaintiffs have moved to preclude Defendants from
submitting such evidence or making that argument (Dkt. Entry No. 690.) For the following
reasons, Plaintiffs’ motion is GRANTED.
II.

Analysis
There is a dearth of case law on this precise question. The closest guidance that has been

presented to the Court is from a small handful of older patent law cases that Plaintiffs contend
stand for the proposition that a court should not allow an infringer to escape liability (or reduce
his liability) on the theory that even if he had not infringed, someone else would have done so.
In the patent context, damages may be based upon “the profits on sales [the patentholder]
would have made absent the infringement, i.e., the sales made by the infringer.” Panduit Corp.
v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978). To obtain lost profits, a
plaintiff must show (1) demand for the patented product, (2) the absence of acceptable
noninfringing substitutes, (3) manufacturing and marketing capacity to exploit the demand, and
(4) the amount of profit he would have made. Id.

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In Panduit, the Sixth Circuit reversed the district court’s calculation of lost profits, in part
because that calculation took into account the presence of competitors who were selling
infringing products, not “noninfringing substitutes.” The court explained that the infringing
defendant “cannot expect to pay a lesser royalty, as compensation for its infringement, on the
ground that it was not the only infringer.” Id. at 1160. The court cited an earlier opinion from
the Fifth Circuit, Bros Incorporated v. W.E. Grace Manufacturing Company, 320 F.2d 594 (5th
Cir. 1963). There, the Fifth Circuit overturned a district court’s calculation of lost profits, where
the district court had reduced the special master’s award by two-thirds because there were two
other businesses selling the same infringing product. The district court had reasoned that, “had
not the infringer wrongfully appropriated and sold the patented machines, 2/3rds of them would
probably have been sold by these two [infringing] competitors.” Id. at 598. The Fifth Circuit
stated that
the consequence of the [District Court’s] holding is strange. In effect it is that an
admitted infringer who has made substantial profits from purloining another’s
patent is not made to account for his acknowledged acts because had he not
poached, another would, or, at any rate, sales of similar products would have been
made, not by the patent owner, but by others.
Id. at 598. The court overturned the district court’s decision “to avoid such an anomaly.” Id.
This Court holds that, although the above-cited patent decisions themselves are not
binding on this case, the principle underlying them—essentially a deterrence principle—applies
with equal force here. In copyright, as in patent, an infringer should not be able to escape or
reduce his liability based on a theory that, had he not infringed, others would have caused similar
losses by purveying infringing works.
The Court acknowledges that adherence to this principle requires a departure from
“reality,” as it did in the patent cases. In those cases, the reality was that the plaintiff patent3

holders would have faced competition from other infringers, even if the Defendants had not
infringed. Thus, their lost profits theoretically should have been adjusted to reflect that reality.
Nevertheless, the courts determined that the public policy at issue outweighed the value of
recognizing the presence of other infringers in the market. So too here, the Court finds that,
notwithstanding the fact that other infringing services did exist that could have caused losses to
Plaintiffs, Defendants should be accountable for losses traceable to Defendants’ own
infringement.
The Court emphasizes that this Order does not preclude the admission of evidence
regarding other illegal services for all purposes. Such evidence may be admissible to show (1)
that a diminution in Plaintiffs’ profits over time is only partially attributable to Defendants
(because others caused some of Plaintiffs’ actual losses), and (2) the extent to which a large
award in this case is likely to deter other infringers. See Bryant v. Media Right Productions, Inc.,
603 F.3d 135, 144 (2d Cir. 2010) (holding that two of the factors to consider in calculating
statutory damages are (1) the revenue lost by the copyright holder, and (2) the deterrent effect on
the infringer and third parties).
As to lost revenue, Plaintiffs have stated that they do not object to Defendants
introducing the historical fact that other illegal services existed, to show that not all illegal
downloading took place through LimeWire. Other infringing services preceded LimeWire, and
other infringing services existed alongside LimeWire. (Plaintiffs acknowledge that LimeWire
did not command 100% of the file sharing market share, and have stated on the record that they
do not object to Defendants’ presentation of evidence showing these facts). What Defendants
may not do is argue that they are not responsible for the infringement that did take place through
LimeWire because that same infringement could have taken place through another system.
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As to deterrence, Plaintiffs seek to submit evidence regarding other illegal services to
show that a large award is needed to deter copyright infringement by others. Defendants seek to
show that large damage awards against similar infringers in the past (and the shutdown of
LimeWire itself) have failed to deter infringement of Plaintiffs’ copyrights. Plaintiffs argue that
Defendants should be precluded from offering such an argument because the Copyright Act itself
demonstrates that Congress has determined that copyright infringement should be deterred
through, among other things, monetary damage awards.
Because evidence of other illegal services will be used by Plaintiffs in arguing that a
large damage award is needed to deter other infringers, Defendants should be permitted to rely
upon similar evidence to counter Plaintiffs’ arguments on the potential actual deterrent effect of a
large damage award in this case. This is not, as Plaintiffs assert, tantamount to encouraging juror
nullification of Congress’s intent to deter infringement. It simply allows Defendants to present
argument and evidence on how effective a deterrent a large damage award will be in this market.
Defendants claim that preclusion of the evidence and arguments at issue on this motion
would “straightjacket” them from arguing to the jury that, for example, a download on LimeWire
does not equate to a lost sale. This is not so. Defendants are not precluded from arguing that, as
an economic matter, LimeWire’s users would not have paid money for songs that they
downloaded for free from LimeWire, and that downloads on LimeWire thus do not equal lost
sales. (There are many reasons why a customer would not have paid money for a product that
she obtained for free, even if there were no other means of obtaining that product for free). But
Defendants may not argue that the reason that LimeWire users would not have paid money for
the songs they obtained illegally through LimeWire is that they would have committed the same
infringement through a different illegal service. Although the Court acknowledges that this
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involves a slight departure from "reality," this departure is no different than the departure by the
courts in the above-cited patent cases.

III.

Conclusion
For the foregoing reasons, Plaintiffs' Motion in Limine to Preclude Defendants'

Argument that Other Illegal Services Would Have Induced Infringement Of Plaintiffs'
Copyrights if Lime Wire Had Not (Dkt. Entry No. 690) is GRANTED.
SO ORDERED.
Dated: New York, New York
April 29, 2011

Kimba M. Wood
United States District Judge

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